The Blog of International Judicial Assistance | By Ted Folkman of Pierce Bainbridge

Case of the Day: Boeing Co. v. KB Yuzhnoye

Posted on September 3, 2013

The case of the day is Boeing Co. v. KB Yuzhnoye (C.D. Cal. 2013). Boeing Co. and the Boeing Commercial Space Co. claimed that BCSC was part of a joint venture called Sea Launch. Yuzhnoye, an instrumentality of Ukraine, was one of the other joint venturers. The joint venture agreement provided that if any party provided a guaranty to a third party, then each of the joint venturers would be liable to reimburse the guarantor its proportionate share of the guaranty. Boeing, at Sea Launch’s request, guaranteed nearly $450 in third-party loans. Later, BCSC agreed to loan $183 million to Sea Launch on the condition that Yuzhnoye guarantee repayment in proportion to its ownership interest in Sea Launch. This second guaranty provided: “The Guarantor [Yuzhnoye] hereby waives personal service of process and consents that service of process upon it may be made by certified or registered mail, return receipt requested … and service so made shall be deemed completed on the fifth Business Day after such service is deposited in the mail.”

In 2009, Sea Launch filed for bankruptcy protection. The third-party lenders called on Boeing’s guaranties, and Boeing paid. Boeing then sought reimbursement from Yuzhnoye, which did not repay. BCSC also sought reimbursement from Yuzhnoye on its guaranty, but again, Yuzhnoye did not pay. Boeing and BCSC sued in the Central District of California. They served process on Yuzhnoye by registered mail, return receipt requested, and Yuzhnoye did not contest receipt. Yuzhnoye sought to dismiss the case for insufficient service of process.

The court held that the provision in the second guaranty agreement for service by mail was a special arrangement for service under 28 USC § 1608(b)(1). The interesting point here is that Boeing and BCSC had joined their claims in a single action, which seems clearly permissible under FRCP 20(a)(1), and the special arrangement for service was found only in the agreement with BCSC, not in the agreement among the joint venturers on which Boeing claimed its right to reimbursement. So Yuzhnoye argued that while it may have consented to service by mail on claims brought by BCSC, it had not consented to service by mail for claims brought by Boeing. The court wisely rejected this argument:

[S]ervice of process is not plaintiff- or claim-specific. Once service has been made under Section 1608, personal jurisdiction exists “as to every claim for relief over which the district courts have [subject matter] jurisdiction …” Nothing in the Federal Rules of Civil Procedure requires a Complaint to be served multiple times by each plaintiff. Indeed, many problems would arise if multiple plaintiffs were required to serve the same defendant more than once, including the calculation of response deadlines triggered by service of process.”

Can we imagine cases where plaintiffs join in a single action in order to evade the service requirements of the FSIA? Yes, but this doesn’t seem to be that case, given how closely Boeing’s claims are related to BCSC’s claims. FRCP 20(a)(1) provides a check on abuse. The rule provides:

Persons may join in one action as plaintiffs if:

(A) they assert any right to relief jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences; and

(B) any question of law or fact common to all plaintiffs will arise in the action.

There could conceivably be cases where Rule 20(a)(1) does not provide an adequate safeguard, but again, this was not such a case.